FTX’s Bahamas Arm Files for Bankruptcy Protection in US
FTX Digital Markets, the Bahamas arm of the now defunct crypto exchange, has filed for Chapter 15 bankruptcy proceedings in the Southern District of New York.
The document, registered late Tuesday night, follows the appointment of insolvency liquidators in the Bahamas earlier that day, and an equivalent case for the exchange’s U.S. arm, FTX.US, which was filed last Friday.
The procedure is intended to allow orderly wind-up of cross-border enterprises so that funds can be returned to creditors as fully as possible – potentially including the site's many regular users.
The pleadings essentially argue that U.S. courts should recognize the Bahamas legal proceedings, allowing other legal claims by creditors to be paused. Under the U.S. bankruptcy code, other parties have three weeks to object before the court makes its decision.
While the Bahamas arm, FTX.com, was supposedly separate from the U.S. market, lawyers argue there’s a link to the U.S. via a client account which held $15,000 at the Holland and Knight law firm in New York.
"It is unclear whether FTX Digital [Markets] has any property in Delaware," the filing on behalf of the company said, in a remark likely to raise further questions about the organization's complex structure.
As the U.S. business wounds up, data from secondary markets suggest that creditors can expect to receive only 8-12 cents on the dollar for their claims on the collapsed company.
FTX has collapsed in a matter of days, following CoinDesk revelations that the line with supposedly separate trading arm Alameda Research was blurred. Chief executive Sam Bankman-Fried resigned on Friday and it is possible the company will face criminal proceedings, an official notice form the Bahamas Securities Commission said Sunday.